ANCs strive to bring jobs to villages

November 19, 2010by Andrew Jensen, Alaska Journal of Commerce

Board meetings can be boring, but one topic always livens up the room at NANA Regional Corp. — job opportunities for shareholders.

"People who may be slumping in their chairs perk up," said Robin Kornfield, vice president of communications and marketing for NANA Development Corp. "That is truly what excites them — what is going to bring food to the tables of our shareholders. The thing that really motivates people is a lot closer to home.

"It drives us every day."

NANA, the Northwest Alaska Native Association, is one of the 13 regional corporations created by the Alaska Native Claims Settlement Act. NANA earned more than $1.2 billion in revenue in 2009 and employed 1,067 NANA shareholders who were paid more than $44 million in wages.

In 2010, NANA's base of shareholder hire has grown to 1,320 employees with $47.4 million in wages. Its efforts to diversify in 2009 included expanding its oilfield services facility in Whitehorse, investing in construction and aviation maintenance companies, finalizing the construction of the Springhill Suites in Anchorage near the Alaska Native Health Center and buying a minority interest in Evergreen Films.

Currently, NANA is building the New Nullagvik Hotel in Kotzebue, a 78-room facility with meeting space and a restaurant open year-round. One of the first businesses NANA became involved in after the passage of ANCSA in 1971 was the original Nullagvik Hotel. Rather than renovate, and with shareholders asking for it, NANA elected to build a new hotel.

It will fill a need in the regional hub and is providing jobs both during construction and after completion next year. According to NANA, 31 shareholders, or 67 percent, are involved in the construction of the New Nullagvik.

Statewide, the ANCSA corporations accounted for about 14 percent of Alaska's 2009 gross state product of $42.6 billion. During 2008, the most recent year for which data is available for all 12 of the regional corporations (the 13th was formed for Alaska Natives living outside the state), the ANCs employed 13,848 Alaskans with a total payroll of $774 million, according to the Alaska Federation of Natives.

Of those employees, 3,577 were Alaska Natives earning an average salary of $56,000. For the first time in 2008, all 12 ANCs paid dividends. The dividends totaled $171 million and accounted for 66 percent of the net profits earned by the 12 regional corporations.

Another source of jobs outside of the regional corporations is the Native health care system. As of November, the Alaska Native Tribal Health Consortium employed 2,013 between direct hire, commission core officers and federal employees remaining from Indian Health Services. That's up nearly 200 employees from 2005.

NANA has also been spreading the knowledge it's gained from more than 30 years in business and 15 years working with the Small Business Administration 8(a) program. NANA "mentored" Kuskokwim Corp., a village corporation, on the ins and outs of 8(a). The partnership was so beneficial that Kuskokwim CEO Maver Carey founded the Alaska Village CEO Association to pay that experience forward.

"We have a lot of jobs down in the states that would employ a lot of shareholders, but they don't want to leave the region," Carey told members of the Alliance Oct. 28. "Many of them want to stay in their hometowns. So now, one of the things we need to do is provide those benefits — providing jobs in the region so people can stay in their villages."

8(a) in spotlight

Alaska Native corporations have been in the national spotlight lately because of their expanding participation in the 8(a)-certification program that allows them favored status in receiving federal contracts.

Critics, including Sen. Claire McCaskill, D-Mo., have assailed the no-compete, sole-source contracts as wasteful, or giveaways to the subcontractors with lightening-rod names like Halliburton that often work for Alaska Native corporations.

But the charge that stings the most is the implication than ANCs aren't benefiting shareholders or improving life in rural Alaska.

ANCs, both regional and the 200 or so village corporations, are perplexed as much as hurt by the criticism. Representatives are quick to point out that 32 percent of federal contracting is sole-source, and ANCs receive roughly a tenth of a percent of those contracts.

Some have pointed to the fact that Boeing Defense, Space and Security is headquartered in Missouri and that may be driving McCaskill's attacks on the special status for ANCs under the 8(a) program. Boeing recently received a sole-source deal from the federal government worth nearly $12 billion, twice as much as went to all the ANCs combined in 2009.

Kornfield, though, finds it hard to believe a company like Boeing — or any major federal contractor — would feel the need to pressure McCaskill over ANCs.

"Sometimes those heavy hitters have been great partners to help us be involved in an opportunity they were involved in," she said. "I'm not prepared to think they're out there trying to take that less than 1 percent of business we have with the federal government. I would hope that doesn't motivate them. I don't entirely know why she's chosen to target the smallest part of what she perceives to be a problem."

Underneath the hurt is an anger that cannot be missed. Whatever passing impatience toward improving village life for Natives is expressed from Outside — or within Alaska — is minimal compared to the drive of the ANCs to bring economic opportunity to the communities they represent.

Jana Turvey, vice president for Afognak Native Corp., a village corporation on the island of the same name just north of Kodiak, called criticism "misinformed political sound bites."

Afognak has paid $12.2 million in dividends to its 800 shareholders over the past three years, distributed $1.5 million through its shareholder development department to fund higher education and it also has a program that awards $5,000 annually to four shareholders for start-up costs to open a business.

That's in addition to the jobs, job training, internships, elder benefits, scholarships, cultural preservation and health and social benefits provided through the ANCs. It has also had three of its subsidiaries "graduate" from the 8(a) program and move into competitive contracting.

"I could stand up here all day and talk about their accomplishments," Turvey told the Alliance at its Oct. 28 meeting. "I'm super proud of them. I cannot stress enough that the benefits you just heard about have been provided to shareholders with one tenth of one percent of all federal contracting dollars. We've only been in program for about 10 years and we have a long way to go."

Resource development

As Turvey noted at the Alliance, the number of Afognak shareholders living below the poverty level is more than 50 percent, making the dividend payments vital to provide everyday needs. But they aren't stopping at cutting checks.

"Many of the Native corporations represent areas that lack natural economic opportunities and resources for development," Turvey said. "(The) 8(a) is the road to economic self-sufficiency for many Alaska Natives. This program is a win-win for Alaska. It delivers good value to the United States and the taxpayer."

Sealaska, with about 20,000 shareholders, is another success story, thanks to its ability to develop natural resources such as timber and regional opportunities such as tourism and ship-loading.

Although Sealaska had a rough 2008 as the financial world cratered, posting a net income loss of more than $40 million, it bounced back from $125 million in revenue during that year to $201 million in 2009 with net income of more than $20 million.

According to economic impact reports prepared by the McDowell Group, Sealaska and its contractors directly employed 363 full- and part-time workers in Southeast with a payroll of about $15 million.

Total direct and indirect employment attributable to Sealaska was 490 employees and $21 million in payroll. Sealaska has an 81 percent shareholder hire rate in its operations near its villages and a 61 percent shareholder hire rate overall.

Certainly the best example of an ANC that has taken advantage of the natural resources available to it is NANA, which owns and operates the Red Dog mine. From 1990 to 2009, the mine provided $1.5 billion in impact to the state and regional economy.

As of March 2010, the mine employed 550 people, with 57 percent of the jobs held by shareholders of NANA. Red Dog operations resulted in $52.1 million in payroll and payments of $217 million to Alaska-based suppliers in 2009.

Red Dog has paid $428 million in royalties since 2006, with most of it shared with other Alaska Native corporations.

Red Dog also is the sole private taxpayer supporting the Northwest Arctic Borough and its schools, paying $6.62 million to the borough in 2009 and $34 million since 2006, as well as $250 million in taxes to the state over the same period.

As the Donlin mine moves forward in the Calista Corp. region, mineral development has been proven as the best way to bring economic opportunity to the village level.

"It's quite fulfilling to be involved with a company and have a project where the mission is to help shareholders and provide jobs," said Lance Miller, NANA vice president of resources. "There are few jobs other than resources. At the local level, mining is the one that can provide living wage jobs near where people grew up. You can export technology and jobs, but you can't export the environmentally sound extraction of minerals."